Korapolu Kanaka Raju, Visakhapatnam V. The ITO, Visakhapatnam

ITA 425/VIZ/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8773 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 24-10-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SESHA SRINIVAS
• Keywords: Rejection of books of accounts; Business income; Corroborative evidences

Judgement Text

ITA NO.425/VIZAG/2016 KORAPOLU KANAKA RAJU, VSKP 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . ' , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NO.425/VIZAG/2016 ( / ASSESSMENT YEAR: 2010-11) KORAPOLU KANAKA RAJU VISAKHAPATNAM ITO, WARD - 1(4), VISAKHAPATNAM [PAN NO. AHXPK2566R ] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI C. SUBRAHMANYAM, AR / RESPONDENT BY : SHRI SESHA SRINIVAS, DR / DATE OF HEARING : 07.02.2018 / DATE OF PRONOUNCEMENT : 09.02.2018 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST ORDER OF THE COMMISSIONER OF INCOME TAX-1 {CIT(A)}, VISAKHAPATNA M VIDE ITA NO.304/2013-14/ITO W-1(4),VSP/2016-17 DATED 30.9.20 16 FOR THE ASSESSMENT YEAR 2010-11. ITA NO.425/VIZAG/2016 KORAPOLU KANAKA RAJU, VSKP 2 2. GROUND NO.1 IS NOT PRESSED THEREFORE THIS GROUND IS DISMISSED AS NOT PRESSED. 3. GROUND NO.1.4 IS GENERAL IN NATURE, WHICH DO NO T REQUIRE SPECIFIC ADJUDICATION. 4. GROUND NO.1.1 IS RELATED TO THE CASH DEPOSITS IN BANK ACCOUNT AMOUNTING TO ` 10.00 LAKHS. DURING THE ASSESSMENT PROCEEDINGS FO R THE ASSESSMENT YEAR 2010-11, THE A.O. FOUND THAT TH E ASSESSEE HAD UNDISCLOSED BANK ACCOUNT IN INDIAN BANK, MAHARANIPE TA, VISAKHAPATNAM WITH ACCOUNT NO.713957051 AND MADE CA SH DEPOSITS IN THE BANK ACCOUNT TO THE TUNE OF ` 10.00 LAKHS FOR WHICH THE ASSESSEE EXPLAINED THE SOURCE AS ADVANCES RECEIVED FOR SALE OF LAND. THE ASSESSEE STATED THAT A SUM OF ` 5 LAKHS WAS RECEIVED FROM SRI K. VENKATA GANESH AND K. GOURI DEVI AS PER THE AGREEME NT DATED 21.1.2010 AND FURTHER SUM OF ` 5 LAKHS FROM SRI A. VENKATA RAO AND A. PADMAVATHI VIDE AGREEMENT DATED 3.2.2010. IN RESPE CT OF K. VENKATA GANESH, THE AGREEMENT WAS DATED 21.1.2010 AND STAMP PAPER WAS PURCHASED ON 28.10.2009 WHICH LEADS TO SUSPICION WI TH REGARD TO THE GENUEINESS OF THE AGREEMENT. BOTH THE AGREEMENTS WE RE UNREGISTERED AND THE ADVANCES WERE STATED BE RECEIVED IN CASH. I N RESPECT OF AGREEMENT WITH MR. KOTHALA VENKATA GANESH, THE SALE AGREEMENT WAS ITA NO.425/VIZAG/2016 KORAPOLU KANAKA RAJU, VSKP 3 DATED 21/01/2010 FOR SALE OF LAND FOR A CONSIDERATI ON OF ` 60 LAKHS AND STATED TO HAVE RECEIVED ` 5 LAKHS AS ADVANCE. THE LAND WAS SITUATED AT MAHARANIPETA, VISAKHAPATNAM IN SURVEY NO.1206 ADMEA SURING 163.80 SQ.YDS. OF SITE AND THE AGREEMENT WAS UNREGISTERED . THE SECOND AGREEMENT WAS ENTERED INTO BY THE ASSESSEE WITH SHR I AMBATI VENKATA RAO AND SMT. AMBATI PADMAVATHI ON 3.2.2010 FOR SAL E OF LAND AT DR.NO.26-7-22, PANDA STREET, VISAKHAPATNAM FOR A CO NSIDERATION OF ` 16 LAKHS AND RECEIVED THE ADVANCE OF ` 5 LAKHS. BOTH THE AMOUNTS ARE RECEIVED IN CASH AND THE AGREEMENTS FURNISHED WERE PHOTOCOPIES. IN BOTH THE CASES THE STAMP PAPERS WERE PURCHASED ON 28.10.2009. THE ASSESSEE HAS NOT PRODUCED THE SUBSEQUENT SALE DEEDS AND SUBMITTED DURING THE APPEAL HEARING THAT THE SALE WAS NOT CON CLUDED AND SALE DEEDS WERE NOT EXECUTED. THE CIT(A) CONFIRMED THE O RDER OF THE A.O. HOLDING THAT THE ALLEGED SALE AGREEMENTS WERE ONLY MAKE BELIEVE ARRANGEMENTS TO EXPLAIN THE SOURCE OF THE IMPUGNED CASH DEPOSITS. FOR THE SAKE OF CLARITY AND CONVENIENCE WE EXTRACT THE RELEVANT PART OF THE CIT(A) ORDER WHICH READS AS UNDER: 5.3 I HAVE CONSIDERED THE SUBMISSIONS AND DETAILS F LIED. IT IS PERTINENT TO NOTE THAT THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE FOR THE CASH DEPOSIT TO THE TUNE OF RS.10 LAKHS NOTED IN HI S BANK ACCOUNT, WHICH WAS NOT DISCLOSED TO THE DEPARTMENT. THE ASSESSEE HAD RAISED A PLEA THAT IT REPRESENTED ADVA NCE FROM SALE OF PROPERTY. BUT THE INQUIRY MADE BY THE AO CLEARLY REVEAL THAT SUCH A CLAIM WAS NOT GENUINE. IT IS ALSO RELEVANT T O NOTE THAT THE ALLEGED PARTIES WHO HAVE PURPORTEDLY MADE THE IMPUG NED ITA NO.425/VIZAG/2016 KORAPOLU KANAKA RAJU, VSKP 4 ADVANCES WERE RELATED PARTIES, AND THEY DID NOT HAV E CREDITWORTHINESS TO MAKE THE ADVANCE. THE LACK OF F INANCIAL CAPACITY OF THESE PARTIES CLEARLY GIVE AN INDICATIO N THAT THE ALLEGED SALE AGREEMENTS WERE ONLY A MAKE-BELIEVE AR RANGEMENT TO EXPLAIN AWAY THE SOURCE FOR THE IMPUGNED DEPOSIT S. NO EXPLANATION WAS GIVEN AS TO WHY THE ADVANCE RECEIVE D ON SALE OF PROPERTY ALREADY DISCLOSED WAS DEPOSITED IN UNDECLA RED BANK ACCOUNT. CONSIDERING THE TOTALITY OF ALL FACTS, I F IND THAT THE AO IS JUSTIFIED IN MAKING THE IMPUGNED ADDITION. THE ALTE RNATIVE PLEA FOR TELESCOPING IS ALSO WITHOUT MERITS, AS THE PLEA ALL ALONG HAD BEEN THAT THE CREDIT WAS OUT OF ADVANCE RECEIVED. T HEREFORE, THE ALTERNATIVE PLEA WITHOUT SUPPORTING EVIDENCE IS REJ ECTED. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. IN THE INSTANT CASE, THE ASSESSEE HAD MADE THE CASH DEPOSI TS OF ` 10 LAKHS ` 5 LAKHS ON 21.1.2010 AND ` 5 LAKHS ON 3.2.2010 BOTH THE DEPOSITS EXPLAINED TO BE ADVANCES RECEIVED FROM SALE OF LAND S. IN SUPPORT, THE ASSESSEE HAD FURNISHED THE PHOTOCOPY OF THE SALE AG REEMENTS BUT THE ORIGINALS SALE AGREEMENTS WERE NOT FURNISHED. NO C ONFIRMATIONS WERE FURNISHED BEFORE THE A.O. OR BEFORE THE CIT(A). TH E ASSESSEE ALSO DID NOT FURNISH THE SUBSEQUENT SALE DEEDS EVIDENCING TH E RECEIPT OF THE CASH. THE AGREEMENTS WERE ENTERED ON 21.1.2010 AND 3.2.2010 ON THE STAMP PAPER PURCHASED ON 28.10.2009. THOUGH A.O. I SSUED SUMMONS THE ASSESSEE FAILED TO FURNISH THE EVIDENCE. THE A .O. HAS ALSO GIVEN A FINDING THAT THE SALE AGREEMENTS DO NOT BEAR THE SI GNATURES OF THE PURCHASERS. THE ENQUIRIES OF THE A.O. REVEALED THA T THE PARTIES WHO HAVE PURPORTEDLY MADE THE IMPUGNED ADVANCES WERE RE LATED PARTIES ITA NO.425/VIZAG/2016 KORAPOLU KANAKA RAJU, VSKP 5 AND THEY DID NOT HAVE THE CREDITWORTHINESS TO MAKE THE ADVANCES. THE LACK OF FINANCIAL CAPACITY OF THE PARTIES CLEARLY S HOWS AN INDICATION THAT THE SALE AGREEMENTS WERE ONLY MAKE BELIEVE ARRANGEM ENTS. SINCE THE ASSESSEE FAILED TO FURNISH THE EVIDENCE TO ESTABLIS H THE GENUINENESS OF THE ADVANCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AND THE SAME IS UPHELD. GROUND NO.1.1 O F THE ASSESSEES APPEAL ON THIS ISSUE IS DISMISSED. 6. GROUND NO.1.2 IS RELATED TO THE CASH DEPOSIT OF ` 19,30,950/- BY CHEQUE. THE ASSESSEE HAS MADE CHEQUE DEPOSITS OF ` 19,30,930/- IN THE INDIAN BANK OF MAHARANIPETA, VISAKHAPATNAM WHIC H IS NOT DISCLOSED TO THE DEPARTMENT. THE AGGREGATE CHEQUE DEPOSITS M ADE IN THE BANK ACCOUNT WERE ` 26,80,476/- OUT OF WHICH ` 7,49,506/- WAS HELD TO BE THE RECEIPTS FROM ORISSA STEVEDORES WHICH WAS ACCEP TED BY THE A.O. FOR THE REMAINING AMOUNT, THE ASSESSEE HAS NEITHER EXPLAINED THE SOURCE OF CREDIT WITH NAMES AND PARTIES FROM WHOM T HE AMOUNTS WERE RECEIVED NOR THE EXPENDITURE INCURRED IN CONNECTIO N WITH THE RECEIPT OF ` 19,30,930/-. THEREFORE, THE A.O. TREATED THE ENTI RE DEPOSIT OF ` 19,30,930/- AS UNEXPLAINED MONEY AND ACCORDINGLY BR OUGHT TO TAX. THE LD. CIT(A) CONFIRMED THE ADDITION SINCE THE ASS ESSEE FAILED TO FURNISH ANY INFORMATION WHATSOEVER WITH REGARD TO T HE CHEQUE RECEIPTS. ITA NO.425/VIZAG/2016 KORAPOLU KANAKA RAJU, VSKP 6 FOR THE SAKE OF CLARITY WE EXTRACT RELEVANT PART OF THE LD.CIT(A)S ORDER WHICH READS AS UNDER: 4.6 THE PERUSAL OF THE BANK ACCOUNTS WITH INDIAN BA NK, WHICH WERE NOT DISCLOSED TO THE DEPARTMENT, SHOW THAT THERE WERE C HEQUE DEPOSITS TO THE TUNE OF RS.26,80,436/- OF WHICH RS.7,49,506/- W AS EXPLAINED TO RELATE TO RECEIPTS FROM M/S. ORISSA STEVEDORES AND FOR WHICH LEDGER EXTRACT OF M/S.ORISSA STEVEDORES WAS FILED. WITH RE GARD TO THE REMAINING CHEQUE DEPOSITS AMOUNTING TO RS.19,30,930 /THE ASSESSEE WAS NOT ABLE TO EXPLAIN AND PROVE THE NATURE OF THE SE RECEIPTS. IT IS NOTED THAT THE AO HAD GIVEN SEVERAL OPPORTUNITIES T O PROVE THE NATURE OF THESE RECEIPTS. BUT THE ASSESSEE FAILED TO PROVE THAT THESE RECEIPTS WERE FROM HIS BUSINESS OPERATION. NO INFORMATION WH ATSOEVER, WAS FILED IN REGARD TO THESE CHEQUE RECEIPTS. THEREFORE, THE AO IS JUSTIFIED IN ASSESSING THE AMOUNT OF RS.19,30,930/- AS UNEXPLAIN ED INCOME OF THE ASSESSEE. THE PLEA REITERATED DURING THE APPEAL PRO CEEDINGS THAT THEY WERE BUSINESS RECEIPTS WAS NOT SUBSTANTIATED AND HE NCE REJECTED. 7. DURING THE APPEAL HEARING BEFORE US, THE LD. A .R. STATED THAT THESE DEPOSITS WERE THE BUSINESS RECEIPTS BUT NO EVIDENCE WAS FURNISHED WITH REGARD TO THE SOURCE OF DEPOSITS AS WELL AS EXPENDITURE INCURRED IN CONNECTION WITH THE EARNING OF THIS MON EY.THEREFORE IT IS ESTABLISHED THAT THE CHEQUE DEPOSITS WERE FROM UNEX PLAINED SOURCES AND THE LD.CIT(A) HAS RIGHTLY CONFIRMED THE ADDITIO N. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND T HE SAME IS UPHELD. IN THE RESULT, THE APPEAL OF THE ASSESSEE ON THIS GROU ND IS DISMISSED. 8. GROUND NO.1.3 IS RELATED TO THE ESTIMATION OF IN COME @ 5%. THE LD. A.R. ARGUED DURING THE APPEAL HEARING THAT THE LD. CIT(A) CONSIDERED THE PERCENTAGE OF PROFIT @ 4% IN THE IMM EDIATELY PRECEDING ITA NO.425/VIZAG/2016 KORAPOLU KANAKA RAJU, VSKP 7 ASSESSMENT YEAR I.E. A.Y 2009-10, HENCE REQUESTED T O ADOPT THE ESTIMATION OF INCOME @ 4% INSTEAD OF 5% CONFIRMED B Y THE LD. CIT(A). LD. CIT(A) HELD THAT ESTIMATION OF INCOME @ 5% WAS REASONABLE AFTER CONSIDERING THE ENTIRE MATERIAL PL ACED BEFORE HIM AND OBSERVED THAT THE ASSESSEE HAD AGREED FOR ESTIMATIO N OF INCOME @ 5% IN HIS LETTER DATED 21.3.2013 FILED BEFORE THE A.O. FOR READY REFERENCE, WE EXTRACT RELEVANT PARAGRAPH OF THE ORDER OF THE L D. CIT(A) MADE AVAILABLE IN PARA NO.4.4, WHICH READS AS UNDER: 4.4 I HAVE CONSIDERED THE ABOVE SUBMISSIONS MADE V IDE PAPER BOOK DATED 40.12.2014 AND WRITTEN SUBMISSIONS DATED 28.1 .2016. I HAVE ALSO PERUSED THE ASSESSMENT FOLDER. IT IS NOT IN DISPUTE THAT THE ASSESSEE COULD NOT PRODUCE PROPER BILLS & VOUCHERS FOR EXPEN SES, AND AS MOST OF THE EXPENSES WERE IN CASH THEY WERE NOT VERIFIABLE. THEREFORE, THE AO IS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT. IT IS ALSO RELEVANT TO NOTE THAT THE ASSESSEE HAS AGREED FOR ESTIMATION OF BUSI NESS RECEIPTS AT 5% IN HIS LETTER DATED 21.3.2013 FILED BEFORE THE AO. IT IS ALSO PERTINENT TO NOTE THAT FOR THE RELEVANT YEAR, THE ASSESSEE'S TUR NOVER HAS INCREASED FOURFOLDS AND HENCE, CONSIDERING THE NATURE OF BUSI NESS AND OTHER OVERALL FACTS OF THE CASE, I CONSIDER THAT THE ESTI MATE OF THE BUSINESS RECEIPTS AT 5% IS FAIR AND REASONABLE AND THE SAME IS UPHELD. 9. FROM THE ORDER OF THE CIT(A), IT IS ESTABLISHED THAT THE ASSESSEE HAD AGREED FOR ESTIMATION OF INCOME @ 5% BEFORE THE A.O. BOTH THE A.O. AND LD. CIT(A) HAVE ESTIMATED THE INCOME @ 5% AFTER CAREFUL CONSIDERATION OF THE NET PROFIT OF EARLIER YEARS AN D CONSIDERING THE FACT THAT THE ASSESSEE FAILED TO PRODUCE THE BOOKS OF AC COUNTS. THE A.O. HAS REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED TH E INCOME. THE LD. A.R. DID NOT MAKE OUT A CASE FOR ESTIMATION OF INCO ME @ 4% WITH ITA NO.425/VIZAG/2016 KORAPOLU KANAKA RAJU, VSKP 8 RELEVANT EVIDENCES EXCEPT ARGUING THAT EARLIER PERC ENTAGE OF INCOME REQUIRED TO BE ADOPTED. WE ARE UNABLE TO CONSIDER T HE REQUEST OF THE ASSESSEE TO REDUCE THE ESTIMATION OF INCOME WITHOUT PLACING THE MATERIAL TO SUBSTANTIATE THAT THE ESTIMATION OF PRO FIT @5% WAS UNREASONABLE. THEREFORE, WE UPHOLD THE ORDER OF TH E CIT(A) AND DISMISS THE APPEAL OF THE ASSESSEE. 10. THE LD. A.R. DURING THE APPEAL HEARING REQUESTE D TO ALLOW TELESCOPIC BENEFIT OF ESTIMATED INCOME FOR THE ADDI TIONS MADE INDEPENDENTLY I.E. CASH CREDITS AND CHEQUE DEPOSITS . HOWEVER, THE LD. A.R. DID NOT MAKE OUT A CASE FOR ALLOWING THE TELES COPIC BENEFIT BY FURNISHING THE NECESSARY DETAILS. THEREFORE, WE DO NOT FIND ANY JUSTIFICATION FOR ALLOWING THE TELESCOPIC BENEFIT A ND REQUEST OF THE LD. A.R. IS HEREBY REJECTED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS D ISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 9 TH FEB18. SD/- SD/- ( . ) ( . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 9.2.2018 VG/SPS ITA NO.425/VIZAG/2016 KORAPOLU KANAKA RAJU, VSKP 9 )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT KORAPOLU KANAKA RAJU, D.NO.16-3- 3, OFFICIAL COLONY, MAHARANIPETA, VISAKHAPATNAM 2. / THE RESPONDENT THE ITO, WARD-1(4), VISAKHAPATN AM 3. + / THE PRINCIPAL CIT-1, VISAKHAPATNAM 4. + ( ) / THE CIT (A)-1, VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM